Due diligence is required when a person or a business poses a greater risk of money laundering, terrorist financing and other financial crimes. This is known as this post on the warpseq.com website enhanced due diligence, which goes above and beyond the standard KYC/AML checks in order to gather information outside the basic scope.
This includes identifying the people and entities that have a connection to clients, such as the ultimate beneficial ownership (UBO) in revealing the true source for wealth as well as funds and business activity. It also examines the relationships behind them and investigates unexplained transactions and actions that could reveal hidden risks.
It’s a key component in the fight against terror and criminal funding. However it’s crucial to note that EDD is to be applied on a case-by-case basis. For instance, a bank account opening in the UK with clear passport, a solid address history and no CCJs may only require CDD. But, another customer might require EDD because of an excessive amount of cash deposit or complex transactions.
The best method to determine the need for EDD is to build an extensive risk assessment and screening framework. This should include both your internal controls as well as external factors like adverse media, political instability, sanctions and terrorism finance and organized crime, as well as fraud and money laundering.
Effective due diligence doesn’t just mean satisfying regulatory requirements or protecting your brand’s reputation. It’s about having a significant impact in the fight against global crime. To accomplish that you require a speedy, accurate and cost-effective identity verification and EDD solution.